Contractor calculator 2026/27

Turn your day rate into real take-home pay, and see how inside IR35, outside IR35 and sole trader compare.

Updated August 2026 · HMRC 2026/27 rates

Illustration of a contractor at a laptop with coins and take-home route signposts

Day rate to take-home

Enter your day rate and how many weeks you expect to bill. We show all three routes for the 2026/27 tax year.

£
Annual invoiced (before tax)
£115,000
Based on 230 billed days at £500 a day.
Outside IR35 (Ltd)
£72,293
Inside IR35 (umbrella)
£68,105
Sole trader
£76,511
Annual invoiced£115,000
Outside IR35, limited company£72,293
  Salary + employer NI£12,570 + £1,136
  Corporation tax−£23,093
  Dividend tax−£18,478
Inside IR35, umbrella£68,105
  Employer NI + levy + margin−£15,779
  Income tax + employee NI−£31,116
Sole trader£76,511
  Income tax + Class 4 NI−£38,489
The limited company figure assumes the tax-efficient setup most contractors use: a £12,570 salary topped up with dividends, and no other income. It excludes accountancy fees (typically £1,000 to £1,500 a year) and assumes the company cannot claim the Employment Allowance, which is the case for a single-director company with no other employees.

Figures use HMRC 2026/27 rates for England, Wales and Northern Ireland. Estimates only, not financial advice. Sources: gov.uk employer rates, corporation tax rates.

What a day rate really leaves you

A day rate looks big next to a salary, and that catches people out. £500 a day sounds like £130,000 a year if you multiply by 260 weekdays. But you don't bill every weekday. Take off holiday, bank holidays, the odd sick day and the gaps between contracts, and 46 billable weeks (230 days) is a realistic full year. That's £115,000 invoiced, not £130,000. And out of that £115,000 you still have to pay tax, and cover the things an employer would normally give you for free.

How much you keep depends far more on your IR35 status than on anything else. The same £115,000 can leave you with £72,300 or £68,100 depending on whether you're outside or inside IR35. That £4,000 gap is the single biggest lever a contractor has.

Outside IR35: the limited company route

If your contract is genuinely outside IR35, you're in business on your own account. You can run a limited company, pay yourself a small salary and take the rest as dividends. The salary is set at £12,570 so it uses your whole personal allowance without triggering income tax, and it's a deductible cost for the company.

On £115,000 invoiced, here's what happens. The company pays you £12,570 salary and £1,136 employer National Insurance on it, leaving £101,294 of profit. Corporation tax takes £23,093 (the company sits in the marginal band between the 19% small-profits rate and the 25% main rate, so the effective rate is about 22.8%). That leaves £78,201 to pay out as dividends. Dividend tax for 2026/27 rose to 10.75% at the basic rate and 35.75% at the higher rate, with a £500 tax-free allowance, so you pay £18,478. Your net personal take-home is £72,293.

Inside IR35: the umbrella route

Inside IR35, HMRC treats you as an employee of the client for tax. In practice you work through an umbrella company, which employs you and runs PAYE. The catch is that the assignment rate the umbrella quotes has to cover employer costs before you see a penny. On £115,000, the umbrella takes its margin (about £1,150 a year), then employer NI at 15% and the 0.5% apprenticeship levy come out, which drops your gross salary to roughly £99,200. You then pay income tax and employee NI on that, leaving about £68,100.

People often feel short-changed by umbrella pay because the employer NI is deducted from a pot that feels like theirs. It isn't a scam; it's how employment tax works. The number is just visible to you because you're funding both sides. An umbrella is simpler than a limited company though. No accounts, no Companies House filings, no corporation tax return. If you're only contracting for a few months, or every contract is inside IR35, the simplicity is often worth the lower take-home.

Sole trader: simple, but no protection

A sole trader on £115,000 profit keeps the most in pure cash terms, about £76,500, because there's no employer NI layer and no corporation tax. You pay income tax and Class 4 NI (6% then 2%) on the profit and that's it. But most agencies and end clients won't engage a sole trader for contract work, because if HMRC later decides the sole trader should have been an employee, the liability can fall on the client. And you have no limited liability, so your personal assets are exposed if something goes wrong. For genuine contract work through an agency, sole trader usually isn't on the table.

So which route wins?

If you're outside IR35 and contracting for the full year, a limited company almost always wins once you're billing more than about £30,000 to £40,000, even after the £1,000 to £1,500 accountancy fees. Below that, or for short stints, an umbrella's simplicity often makes more sense. Inside IR35 you don't really have a choice: the limited company saves you nothing on an inside-IR35 contract, so an umbrella is the sensible route.

Thinking about the salary-versus-dividend split in more detail? Our dividend tax calculator works out the optimal mix. And if you want to see how contracting compares to a permanent role on the same money, the employed vs self-employed comparison lays it out.

Worked example: £500 a day, 46 weeks, outside IR35

StepAmount
Day rate × 230 days£115,000
Salary (uses personal allowance)£12,570
Employer NI on salary£1,136
Profit before corporation tax£101,294
Corporation tax (marginal, ~22.8%)£23,093
Dividends available£78,201
Dividend tax (10.75% / 35.75%)£18,478
Net personal take-home£72,293

Sources

  • HMRC rates and thresholds for employers 2026 to 2027 gov.uk
  • Corporation Tax rates gov.uk
  • Changes to tax rates for dividend income (Budget 2025) gov.uk
  • Off-payroll working rules (IR35) gov.uk

Common questions

Multiply your day rate by the days you bill in a year, then take off tax and National Insurance based on how you trade. On £500 a day over 46 billable weeks (230 days) you invoice £115,000. Outside IR35 through a limited company you keep about £72,300 after corporation tax and dividend tax. Inside IR35 through an umbrella you keep about £68,100 once employer NI comes out of the assignment rate. As a sole trader you keep about £76,500, but with no limited liability.
Inside IR35 means HMRC treats you like an employee of the client for tax, so you pay employment taxes on the whole fee and usually work through an umbrella company. Outside IR35 means you are genuinely in business on your own account, so you can trade through a limited company and pay yourself with a small salary plus dividends. The same day rate leaves you with noticeably more outside IR35 because you avoid employer NI on most of the income.
A limited company keeps more of a given day rate when you are outside IR35, because you split income between a low salary and dividends and avoid National Insurance on the dividend part. An umbrella is simpler with no accounts or filings, and it is usually the only option inside IR35. On £500 a day the limited company route leaves roughly £4,000 more a year than an umbrella, before you count accountancy fees of £1,000 to £1,500.
There are 260 weekdays in a year. Most contractors bill 220 to 230 of them once you remove holiday, bank holidays, the odd sick day and gaps between contracts. This calculator uses billable weeks so you can set your own figure. Using 46 weeks (230 days) is a realistic full-year assumption; use fewer if you expect time on the bench.
Yes, but the bigger deduction is employer National Insurance. The assignment rate an umbrella quotes has to cover employer NI at 15%, the 0.5% apprenticeship levy and the umbrella's own margin before you get a gross salary. That is why the umbrella take-home looks low next to the day rate. The margin itself is small, usually £15 to £30 a week.

Not contracting through an agency? Our self-employed tax calculator covers sole traders, and the dividend calculator optimises your salary and dividend split.